Figure 13-17 -Refer to Figure 13-17. in the Long Run, Why Will

question 223

Multiple Choice

Figure 13-17
-Refer to Figure 13-17. In the long run, why will the firm produce Q_f units and not Q_g units, which has a lower its average cost of production?

• A) Although its average cost of production is lower when the firm produces Q_g units, to be able to sell its output the firm will have to charge a price below average cost, resulting in a loss.
• B) At Q_g, average cost exceeds marginal cost so the firm will actually make a loss.
• C) At Q_g, marginal revenue is less than average revenue which will result in a loss for the firm.
• D) The firm's goal is to charge a high price and make a small profit rather than a low price and no profit.

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Definitions:

Asset Structure

The composition of a company's fixed assets and current assets, which shows how the company's resources are invested in different types of assets.

Financial Plan

A detailed strategy outlining an individual's or organization's financial goals and the means and timeline for achieving them.

Pro Forma Sales Forecasts

Pro forma sales forecasts are projected financial statements showing expected sales revenue, often used for planning and investment assessment.

Pro Forma Statements

Financial statements that project a company's financial performance in the future, based on certain assumptions and adding or excluding non-recurring items.